Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

The Dollar Returns to City Stores

Some Moscow stores have begun accepting payment for goods in dollars again, legally outwitting a Central Bank decree that banned cash sales for hard currency as of Jan. 1, business people and bankers said Wednesday. The new type of transaction exploits a loophole in the decree that allows non-cash payment, and appears to be gaining popularity quickly. "We came up with this about two weeks ago," said Colm Fitzsimons, manager of the Garden Ring Supermarket on Bolshaya Sadovaya Ulitsa. The store's cashiers have become part-time employees of a local commercial bank, Moskombank, allowing them to issue bank receipts for dollar payments that customers in turn use to pay for groceries. "The client pays the bank, not the store," Fitzsimons said. "It is as if he is paying with a check." The Central Bank has not yet moved to close the loophole, and a bank spokesman said that the transactions were perfectly legal since they are technically a non-cash debit operation. The Central Bank decree only bans sales for foreign cash, as opposed to credit cards, debit cards and checks. "If stores have an agreement with a bank then it is legal," said the spokesman, Alexei Sitnin. Asked how the state bank would react if the practice became widespread, Sitnin said only that each case would be judged individually. According to Andrei Kiselov, managing director of Moskombank, other stores are already catching on. He refused, however, to name his bank's other customers. "We began offering this service immediately after the New Year, but it took a little time to work out the details," he said. "Now it has spread." Some restaurants also take dollar payment but use a simpler system. At Patio Pizza, for example, representatives of Krystal Bank work alongside the restaurant's cashier and take dollars as a debit payment to the bank. Unlike at the Garden Ring, the customer never actually sees the bank receipt. Other stores, such as the U2 Family Superstore, said that they were considering using the new mechanism. "We have been looking into this over the last few weeks," said U2 manager Coron Carmody. Until the Central Bank ban took effect at the start of the year, the dollar was used as a virtual parallel currency in Russia. Reformists Yegor Gaidar and Boris Fyodorov, respectively economics minister and finance minister at the time, came up with the idea of a hard-currency ban to help support the ruble and reduce the Russian economy's dependence on foreign currencies. But Fitzsimons said that the ban had proved difficult for stores because of the ruble's instability. He said that Russian banks take up to four days to change ruble payments into hard currency and use official rates from the day they exchange money, not the day the money was received by the stores. This caused stores to "bet" on the ruble by raising their exchange rate above official exchange rates, which in turn raised prices by about 2 percent. Not only was this unpopular with customers, but businesses felt uncomfortable betting on the ruble. "We are in the supermarket business, not money exchange," said Fitzsimons. Lawyers said that the operation fulfilled the letter of the decree but potentially violated its intention, which was to ban cash sales for hard currency.